RALEIGH – Public schools across the state celebrated a ruling earlier this month by the North Carolina Supreme Court. But I’m not convinced that it will yield the financial windfall many education officials obviously think it will.
The issue is the disposition of millions of dollars collected by state agencies as fines for non-criminal transgressions ranging from parking violations to tax-code penalties. In the past, some agencies kept the proceeds of these fines for their own use. In other cases, the money went to the state’s General Fund to be appropriated by the General Assembly for whatever purpose it wished.
Now, under the court’s ruling, the revenues collected from most of these civil penalties will flow directly to public schools. The state constitution contains a provision that earmarks for public education any proceeds collected because of “any breach of the penal laws of the state.” The provision had long been interpreted as requiring that all collections of criminal fines or penalties should be given to schools, rather than pocketed by the collecting agency, but civil penalties had not been treated in the same categorical manner.
Last November, voters clarified the issue going forward by a constitutional amendment earmarking many civil penalties for schools. Now, according to the supreme court decision, it seems that the preexisting provision had itself required earmarking in most instances, meaning that the state should have been conveying the funds to schools for many, many years.
Legally, the clock in this case appears to start when it was filed in 1995. Ed Dunlap, executive director of the school board association, told The Charlotte Observer that settling the accounts could involve a one-time payment to schools of as much as $500 million, plus the tens of millions of dollars expected annually from now on. “We’re very pleased,” he said. I’ll bet.
But the enthusiasm isn’t universal among government officials. The folks at UNC-Chapel Hill, for example, are clearly dismayed at the prospect of losing the millions of dollars in parking-ticket revenue it relies on each year to finance parking improvements on campus. Count many state legislators as also likely to be part of the “you’ve got to be kidding” caucus, given the lack of slack in the state’s fiscal rope right now. They’re in the middle of negotiating a deal on a budget already jammed with higher taxes and fee hikes.
My guess is that no whopping check is forthcoming from the General Assembly in any event, for reasons that expose how tricky it can be to rely on earmarking in state budgets (pay attention, all you “education lottery” fans). You see, the state constitution may well require that all fines and forfeitures be forked over to public schools. But the constitution doesn’t really require those funds to constitute a net increase in education funding. For reasons already explained at some length, the state legislature retains the right to decide how much money will be spent on public education. If fines and forfeitures will pay a higher ratio of that amount than in the past, the likely result is that some general tax revenues will be supplanted in the future to pay for other state services lawmakers deem to be important.
It may not get spelled out explicitly. It won’t have to be. If next year’s allocation of General Fund taxes to education grows by, say, $200 million, who can prove that it would have grown $250 million but for the decision?
Hood is president of the John Locke Foundation.